Moderating Effect of Firm Size on the Relationship between Board Structure and Firm Financial Performance

Abstract

The collapse and failure of several corporate firms around the globe are attributable to lack of efficient corporate governance mechanism, consequent upon which, researchers have come up with diverse recommendations which are as a result of various contextual variables, scope of the study and varying roles of boards in different jurisdictions. It is on this note that this study examines the moderating effect of firm size on the relationship between board structure proxy by board size, board independent and board gender diversity and financial performance proxy by return on assets of quoted deposit money banks using secondary data which spanned from 2012 to 2019, a post International Financial Reporting Standards (IFRS) implementation period.The study employed a random effect regression analysis technique to estimate the values of the parameters and in order to achieve reliability of the result, robustness tests like Correlation Matrix, Shapiro-Wilk Normality Test and Hausman Specification Test were conducted. HeteroskedasticityBreusch-Pagan Test was equally used to test for the assumption of no constant variance of the data. Findings however indicate that board size moderated by firm size has a negatively insignificant effect on return on assets of quoted deposit money banks in Nigeria. Also, board independence moderated by firm size has a negative significant effect on ROA while board gender diversity with the interaction of firm size is negatively significant at 1% level of significance. This research recommends among others that firm size should be properly put into consideration in constituting the number of board members and the number of women on the board of directors of deposit money banks in Nigeria, because firm size is one of the major determinants and the firm size shouldn’t be a determining factor in the area of board independence of deposit money banks in Nigeria.